Philippine Geothermal, Inc. Employees Union (PGIEU) vs. Chevron Geothermal Phils. Holdings, Inc.

Tirol
Topic: Wage Distortion

180. Philippine Geothermal, Inc. Employees Union (PGIEU) vs. Chevron Geothermal
Phils. Holdings, Inc.
PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION (PGIEU) v. CHEVRON
GEOTHERMAL PHILS. HOLDINGS, INC.
Doctrine: The term “Wage Distortion” was explicitly defined as “a situation where an increase in
prescribed wage rates results in the elimination or severe contraction of intentional quantitative
differences in wage or salary rate between and among employee groups an establishment as to
effectively obliterate the distinctions embodied in such wage structure based on skills, length of
service or other logical bases of differentiation.” Contrary to petitioner’s claim of alleged “wage
distortion”, Article 124 of the Labor Code of the Philippines only cover wage adjustments and
increases due to a prescribed law or wage order.
Action Sequence: VA (in favor of respondent)  CA (sustained VA decision)
Facts: Petitioner is a legitimate labor organization and the certified bargaining agent of the rank
employees of Chevron Geothermal Phils. Holdings, Inc.
In July 2008, the petitioner and respondent formally executed a CBA which was made effective
for the period from November 1, 2007 until October 31, 2012. Under Article VII, Section 1
thereof, there is a stipulation governing salary increases of the respondent’s rank file
employees. In October 2009, a letter (dtd September 20, 2009) was sent by the petitioner’s
President to respondent expressing, on behalf of its members, the concern that the aforesaid
CBA provision and implementing rules were not being implemented properly pursuant to the
guidelines and that, if not addressed, might result to a salary distortion among union members.
Respondent responded by letter denying any occurrence of salary distortion among union
members and reiterating its remuneration philosophy of having “similar values for similar jobs”,
which means that employees in similarly valued jobs would have similar salary rates. It
explained that to attain such objective, it made annual reviews and necessary adjustments of
the employees’ salaries and hiring rates based on the computed values for each job.
Finding the explanation not satisfactory, petitioner, with respondent’s approval, referred the
subject dispute to the Voluntary Arbitration of the NCMB. It averred that respondent breached
their CBA pro vision on worker’s wage increase because it granted salary increase even to
probationary employees in contravention of the express mandate of that particular CBA article
and implementing guidelines that salary increases were to be given only to regular employees.
To cite an example, petitioner alleged that respondent granted salary increases of P1,500.00
each to then probationary employees Sherwin Lanao and Jonel Cordovales at a time when they
have not yet attained regular status. Lanao and Cordovales were regularized only on January 1,
2010 and April 16, 2010, respectively, yet they were given salary increase for November 1,
2008.
As a consequence of their accelerated increases, wages of said probationary workers equated
the wage rates of the regular employees, thereby obliterating the wage rates distinction based
on merit, skills and length of service. Therefore, the petitioner insisted that its members’ salaries
must necessarily be increased so as to maintain the higher strata of their salaries from those of
the probationary employees who were given the said premature salary increases.
On the other hand, respondent maintained that it did not commit any violation of that CBA
provision and its implementing guidelines; in fact, it complied therewith. It reasoned that the
questioned increases given to Lanao and Cordovales’ salaries were granted, not during their
probationary employment, but after they were already regularized. It further asseverated that
there was actually no salary distortion in this case since the disparity or difference of salaries
between Lanao and Cordovales with that of the other company employees were merely a result
of their being hired on different dates, regularization at different occasions, and differences in
their hiring rates at the time of their employment. After due proceedings, the Voluntary Arbitrator
rendered a Decision in favor of respondent, ruling that petitioner failed to duly substantiate its
allegations that the former prematurely gave salary increases to its probationary employees and
that there was a resultant distortion in the salary scale of its regular employees.
Issue: Whether there was wage distortion.
Ruling: NO.
There is no wage distortion in this case. Upon the enactment of Republic Act (R.A.) No. 6727
(Wage Rationalization Act, amending among others, Article 124 of the Labor Code) on June 9,
1989, the term “Wage Distortion” was explicitly defined as “a situation where an increase in
prescribed wage rates results in the elimination or severe contraction of intentional quantitative
differences in wage or salary rate between and among employee groups an establishment as to
effectively obliterate the distinctions embodied in such wage structure based on skills, length of
service or other logical bases of differentiation.” Contrary to petitioner’s claim of alleged “wage
distortion”, Article 124 of the Labor Code of the Philippines only cover wage adjustments and
increases due to a prescribed law or wage order, viz.:
Article 124. Standards/Criteria for Minimum Wage Fixing. x x x x Where the application
of any prescribed wage increase by virtue of a law or Wage Order issued by any
Regional Board results in distortions of the wage structure within an establishment, the
employer and union shall negotiate to correct the distortions. Any dispute arising from
the wage distortions shall be resolved through the grievance procedure under their
collective bargaining agreement and, if it remains unresolved, through voluntary
arbitration.
Prubankers Association v. Prudential Bank and Trust Company laid down the four elements of
wage distortion, to wit:
1. an existing hierarchy of positions with corresponding salary rates;
2. a significant change in the salary rate of a lower pay class without a concomitant
increase in the salary rate of a higher one;
3. the elimination of the distinction between the two levels; and
4. the existence of the distortion in the same region of the country.
The apparent increase in Lanao and Cordovales’ salaries as compared to the other company
workers who also have the same salary/pay grade with them should not be interpreted to mean
that they were given a premature increase for November 1, 2008, thus resulting to a wage
distortion.
The alleged increase in their salaries was not a result of the erroneous application of Article VII
and Annex D of the CBA, rather, it was because when they were hired by respondent in 2009,
when the hiring rates were relatively higher as compared to those of the previous years. Verily,
the setting and implementation of such various engagement rates were purely an exercise of
the respondent’s business prerogative in order to attract or lure the best possible applicants in
the market and which we will not interfere with, absent any showing that it was exercised in bad
faith. Management prerogative gives an employer freedom to regulate according to their
discretion and best judgment, all aspects of employment including work assignment, working
methods, the processes to be followed, working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline, dismissal and recall of workers.
This right is tempered only by these limitations: that it must be exercised in good faith and with
due regard to the rights of the employees.
Petitioner claims that the wages of other employees should also be increased in order to
maintain the difference between their salaries and those of employees granted a “premature”
wage increase. Such a situation may be remedied if it falls under the concept of a wage
distortion as defined by Article 124 of the Labor Code of the Philippines. However, as already
discussed, there is no wage distortion in the case at bench. Not all increases in salary which
obliterate the salary differences of certain employees should be perceived as wage distortion.
Dispositive: Petition DENIED.

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Topic: Wage Distortion

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